Bayesian Estimation and Unit Root Test for Logistic Smooth Transition Autoregressive Process

Anoop Chaturvedi () and Shivam Jaiswal ()
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Shivam Jaiswal: University of Allahabad

Journal of Quantitative Economics, 2020, vol. 18, issue 4, No 1, 733-745

Abstract: Abstract The paper considers nonlinear logistic smooth transition autoregressive (LSTAR) process and aims to detect the unit root under the null hypothesis of a random walk process against the alternative of a stationary LSTAR process and to estimate the parameters of the process in Bayesian framework using MCMC. The simulation study is carried out for investigating the performance of the Bayes estimators for parameters and Bayesian unit root test and it has been observed that the estimates of parameters of the LSTAR process are close to the true parameter values. It has been observed that the Bayesian unit root test performs well and the power of the test is high even for the boundary cases having root close to unity, at least when the sample size is large. Since the LSTAR models are widely applied for real exchange rate modeling, the theoretical results are illustrated empirically for the real exchange rates of ten OCED countries.

Keywords: LSTAR process; Unit root; Model comparison; Parameter estimation; Bayes factor; MCMC (search for similar items in EconPapers)
JEL-codes: C22 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (1)

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DOI: 10.1007/s40953-019-00193-9

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